Building partnerships promotes profitability

OEM Insight guest columnist Alan Metelsky, leader of the controls engineering group at Gleason Works, says there are better and more profitable ways to form relationships with your suppliers.

By Alan Metelsky, Gleason Works 

"WE'RE GOING TO leverage value-added strategic partnerships.” That sounds like a line right out of a Dilbert comic. Corporate jargon aside, there is real value to building strong relationships with suppliers.

In the past, having a relationship with a supplier often meant unspoken agreements through an “old boy” network, and shady deals on the golf course that rarely made good business sense. A cynical view of the future might suggest that cost pressures will prevent the formation of long-term partnerships as businesses hop from supplier to supplier chasing the lowest bid.

I think there’s a middle ground that can yield an effective and profitable partnership.

To my mind, there are three major elements in building successful partnerships: mutual understanding, effective technical exchange, and communications. Each is vital to the other, yet there is no formulaic approach to success. The first step, however, lies in understanding and committing to each element.

Mutual understanding clarifies what the parties wish to gain from the partnership. Although it seems obvious, one of the first keys is to understand that the success of both businesses is linked. A supplier must be willing to point out an opportunity for cost savings in the customer design, even if it means the elimination of one of its products. As a result, the customer might be more competitive and increase its volume with the supplier.

The customer needs to realize that a slightly higher component cost provides reasonable margins and allows suppliers to invest in future development and value-added services. An honest disclosure of capabilities, volumes, and future business plans is part of the formula, too, as is buy-in and support from all levels of both companies. A regular and honest review of successes (and failures) promotes continuous improvement.

Technical exchange traditionally has meant applications assistance, but in a true partnership there is greater depth and a two-way information flow. Bringing technical resources together for face-to-face, on-site workshops helps supplier engineers get beyond specified parameters to better learn the customer’s end user and process, opening the door for new and novel applications. Customer engineers benefit from first-hand observation of supplier capabilities and often gain an understanding of which requests are difficult or costly to fulfill. In-depth supplier audits on customer designs often yield cost-saving opportunities and product improvement. In turn, customer participation in development and design reviews can bring unique perspective to new product design.

Communications is vital. Unfortunately, effective communications often are the most difficult and subjective aspect to a partnership. The easy answer is that you simply have formal and professional interactions with your contacts; however, the reality is that most long-term business relationships require more. Recollections of greasy salesmen jotting down my wife’s name for future reference still make me cringe--“Hey guy, how’s it going? How’s insert name here doing?” Matching personalities on both sides can seem more like “The Dating Game,” yet open and honest communication often is dependent on the success of this effort.

It is important to take advantage of any partnership-developing opportunities to get things off to a strong start. I recently participated in CONTROL DESIGN’S Automation Exchange; the event provided a unique venue for developing professional relationships. The event organizers worked to assure that the right people attended—the OEMs and suppliers alike were decision makers and technical leaders. The number of attendees was limited, permitting extended meetings that could be tailored for each customer.

The result was a depth of communication that far exceeded the normal “trade show” experience. The final aspect of the event, and what I believe to be the most valuable, was the opportunity to begin building personal relationships. All the formal meetings, meals, technical debates, and social discussions with the group seemed to concentrate a year’s worth of interaction into three days. I left the event with several new opportunities that got a huge head start in all three elements of partnership building.

At a time when every business is seeking a competitive advantage, the gains offered by solid partnerships are unique. Given the hurdles that must be overcome, the outcomes of a successful partnership are far more satisfying than finding a slightly lower cost doodad from Company X.


  About the Author
Alan Metelsky is the leader of the controls engineering group at Gleason Works in Rochester, N.Y., a manufacturer of CNC machine tools for gear processing. You can reach him at AMetelsky@Gleason.com.

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